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How to Budget for Annual Expenses so They Don’t Sneak Up on You

Fall is my favorite season of the year, but it’s also the most difficult on my budget. Fall is when a lot of my annual expenses are due, like my car registration, my dental and eye doctor appointments, and my dogs’ annual vet appointment for a check-up and shots.

These expenses used to sneak up on me and cause me to bust my budget despite the fact that they happen at about the same time every single year. But now I’ve finally figured out how to budget for these (and other) annual expenses so my budget can handle it when they come up. Here are a couple of different ways you can try to budget for annual expenses so they don’t sneak up on you.

Plan Ahead

If you’ve been tracking your spending and expenses, you’ll easily be able to plan for the next year. But if you haven’t been tracking your expenses in the past, you should start now so you’ll be able to build up the point that you know almost exactly when your annual expenses are due and how much they’ll cost you.

After you have an idea of when your annual expenses are due and how much they’ll cost, you need to start saving for them throughout the year.

Set Up an Escrow Account

Setting up an escrow account is one way to plan ahead for annual expenses. Many mortgage providers have escrow services available to help you plan for your annual homeowner’s insurance payment and property tax payments.

Create a Special Savings Account

If you don’t have an escrow account available to you, you can create a specialized savings account to help you plan for annual expenses.

After you create the account you need to determine how much to set aside each month for your annual expenses. To do this you should add up the total estimated cost of all of your annual expenses and divide by 12. This will give you a monthly target for what you need to be saving each month to cover your annual expenses.

Make Sure Savings are Accessible

If you are already a good saver you likely won’t have any trouble saving up for annual expense throughout the year. But you still need to make sure you have the money easily accessible when it’s time to make the payment. Putting money into CD’s and or investment accounts is a great way to earn interest on your money, but it isn’t nearly as accessible when you need it. Therefore, it’s a good idea to keep at least some of your money in a traditional savings account.

Many physical banks don’t offer very good interest rates on savings accounts, but you can always store your savings in a high yield savings account at an online only bank or at a credit union, where interest rates on savings accounts are likely to be much higher.

After you get in the habit of setting aside money for your annual expenses every month, you’ll find yourself a lot less stressed about making your payments annually instead of monthly. This option can even save you money at times. For example, by changing my insurance to an annual payment, I saved about $120, which is the equivalent of one monthly payment on my car insurance. They key is setting up a system that works for you and adjusting the monthly savings amount as your annual expenses change over time.